'Unintended consequences' no excuse for sloppy tax policies

It didn’t make any of the New Year’s lists, but it has changed our lives nonetheless. It is the acceptance of “unintended consequences” as a viable excuse for catastrophic public policy.

Sure, we all make mistakes. Indeed, the economic philosophies favored by this foundation are grounded on the assumption that no matter how smart the humans gathered in a room, they would lack sufficient information to make flawless decisions.

Those who now plead unintended consequences, however, do not concede such fallibility. They guarantee effectiveness if not perfection. All they require is officially licensed expertise, unlimited money and, of course, the power of fiat.

A Pulitzer Prize winner, Saul Bellow, famously referred to this in aggregate as “The Good Intentions Paving Company,” with the road to hell being what is paved. We have come to expect this from Washington. What is dismaying is that we are seeing this same thinking at the city, county and state level.

On our desk is an excellent analysis by Scott Smith of the Kokomo Tribune under the headline, “2008 Property Tax Reform Had Unintended Consequences.” Smith casts a reporter’s eye on an inference by the state Chamber of Commerce that it was blindsided by former Gov. Mitch Daniels’ property-tax reform.

It turns out that the signature achievement of the Daniels administration contained anti-business elements that in 2008 apparently slipped passed the Chamber, which supported the enabling legislation. The result was a $3 billion shift from residential homesteads onto industrial and commercial property. This, dagnabbit, skewed the tax burden away from job creation at the very moment Indiana entered a historic recession and just as falling revenues put small-town budgets under stress. Who knew?

Dr. Eric Schansberg for one. Schansberg, an economist and adjunct scholar with the Indiana Policy Review Foundation, pointed out what should have been obvious: Unless someone finds the courage to triage government spending, you cannot cap one set of taxes without raising rates on another. Schansberg, writing in the January 2008 issue of the foundation’s quarterly journal, offered this warning regarding Daniels’ politically crafted approach:

“For those Hoosiers who want a large government, there are no easy ways to raise the money to finance it. There are no efficient ways to raise it, either. And of course, finding an equitable way to raise so much money is particularly difficult – at least in the eyes of those being taxed.”

Schansberg went on to explain that property taxes were only a symptom of larger problems that it turns out were only deferred by the tax cap, all of them left unsolved and unalleviated.

Those problems, Schansberg noted, are the predictable rather than unintended consequence of “trying to fund large-scale government, and fund it through the activity of politicians, interest groups and a public that hasn’t the time or energy to pay much attention to the inequities and inefficiencies of political behavior.”

And these were the most conservative of Indiana’s political players. That understood, careless tax policy may be only a symptom of Indiana’s troubles, the real problem being an excuse-prone leadership that places the interests of government over those of a citizenry.